Transferability of Human Capital and Immigrant Assimilation: An Analysis for Germany

Thomas K. Bauer 3
1Ruhr Graduate School in Economics, Germany, 2Ruhr-University Bochum, Germany, 3RWI Essen, Germany

This paper investigates the role of imperfect human capital transferability across countries in
explaining the immigrant-native wage gap. Using data for West Germany, our results reveal that, overall, education and labor market experience accumulated in the home countries of immigrants receive significantly lower returns than human capital obtained in Germany. We further find evidence for heterogeneity in the returns to human capital of immigrants across origin countries. In particular, immigrants from high-income countries tend to earn the highest returns to their foreign human capital than the other groups. This lends support to the importance of compatibility of the immigrants' home and host countries in the transferability of

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